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Parasole Has an Appetite for Change to Keep Its Restaurants Relevant



Pinball machines and other games are part of Parasole’s rec room relaunch at Libertine, where co-founders Pete Mihajlov (left) and Phil Roberts know they’re not the target customer.

“I don’t even know how to work this thing,” says Pete Mihajlov, only half kidding as he fiddles with the newly installed Batman-themed pinball machine at Libertine. “Is it still just a nickel to play?”

He and fellow Parasole co-founder Phil Roberts chuckle as they survey the changes underway in their restaurant at Calhoun Square in the heart of Minneapolis’ Uptown neighborhood. We’re there in early April and the men, both in their late 70s, know they’re not the target demographic for the new rec room theme bringing skee ball, table tennis, retro Nintendo games and rooftop beer pong to the location. They also know being nimble and adjusting to the market is no joke for restaurants wanting to survive in an ultra-competitive industry where, as Mihajlov puts it, “the tolerance for error is nonexistent.”

Uptown in particular is an unforgiving neighborhood where changing demographics and shifting customer expectations accelerated the closings last year of Michael Larson’s upscale Italian eatery, Parella, and chef-driven Scena Tavern from multi-unit restaurateur Paul Dzubnar. Though both had well-known chefs at their helm, their owners acknowledged a failure to deliver what the customers wanted.

What that is, exactly, remains somewhat unclear, but what became clear to Roberts, Mihajlov and Libertine GM Weston Winkler, who pitched the rec room/barcade idea, was the original iteration of Libertine had too much of a culinary focus.

When it replaced Uptown Cafeteria in July 2014 Libertine was overseen by top Minnesota chef Tim McKee, who gave it a modern steakhouse vibe heavy on classic butcher cuts. But after two-and-a-half years of watching volumes dwindle, save the sprawling rooftop, Parasole took action, slowly phasing in more bar snacks, burgers and sandwiches before incorporating the games.

In that first weekend after the full rec room relaunch, “we did twice the capacity and half the check average,” says Roberts.

“Customers here are more youthful, they’re price-conscious,” he continues. “The customer profile of this area has dramatically changed—everyone is learning. You’ve gotta change the concept to fit the customer profile.”

While some may say Parasole is simply jumping on a barcade trend that’s brought the likes of Up-Down and Punch Bowl Social to the  Twin Cities, Parasole doesn’t see this move as following a fad. Plus, doing nothing is not an answer, says Chief Operating Officer Donna Fahs, particularly in an Uptown neighborhood that’s eschewing more sophisticated, culinary-driven concepts in favor of the casual.

“If you don’t react, that’s not an answer. You have to try to get the market share,” says Fahs, and in Uptown “the crowd is now really about gathering, having fun, more of the bar experience.” 

And, Fahs adds, “we have a lease that we’re obligated to so we’ve got to make it work for us.”

 

Making it work for 40 years

For Roberts and Mihajlov, theirs is a relationship going back to their college days at the University of Illinois where they met working at a shoe store in the early 1960s. Years later they were both living in Minneapolis and ran into each other at the old Court Bar downtown, with subsequent conversations between the retail design company owner (Roberts) and Pillsbury executive (Mihajlov) turning toward the lack of inventive dining options in the Twin Cities. 

Parasole’s newest restaurant is Field Day, essentially Good Earth in counter-service form.

As the story goes, both men’s jobs had them traveling frequently, Mihajlov to the West Coast, Roberts to the East, and after tasting dishes such as quiche lorraine and fettuccini alfredo—“Yes, that’s how naïve we were,” points out Roberts—the two decided to bring some of those ideas home and open their own restaurant. 

“It was a double-edged sword,” says Roberts of the frequent travel, in that it took him away from his home and family but also afforded him opportunities to dine out in different cities. “My clients in New York, everyone felt sorry for me coming from Minnesota, so they’d take me to the hottest, newest, edgiest spots.”

Everything began with Muffuletta, which opened in 1977 after Roberts and Mihajlov bought what was the Lamplighter Inn at the corner of Milton Square on Como Avenue in St. Paul.

“We didn’t have the foggiest idea what we were doing,” says Roberts. 

“Muffuletta wasn’t a big investment,” adds Mihajlov, “it was our play thing. But we learned pretty quick it’s not a hobby. There’s no business quite like it.” 

Pronto followed in 1981, the product of a Roberts client dinner at the New York City restaurant where he says he saw Dustin Hoffman in line, a display pasta-making station and a menu of high profit items. 

“I met the owner and said, I have to have one of these,” Roberts says, wanting to bring the concept to Minnesota.

“We debated over a bottle of gin whether we’d try to knock it off or get them to let us expand,” recalls Mihajlov.

Ultimately they negotiated the equivalent of a franchise agreement and Pronto opened at the Hyatt Hotel in Minneapolis, where it operated until 1999 when Parasole replaced it with Oceanaire Seafood Room (a brand they later spun off).

Muffuletta is still serving its beer cheese soup and signature sandwich, a layering of ham, spicy capicola, pistachio mortadella, and genoa salami with provolone, smothered in olive relish on fresh focaccia. Parasole and the restaurant industry, on the other hand, have changed quite a bit.

 

Cast of characters

Fast-forward 40 years and Parasole has 1,400 employees, nine concepts, and 13 locations in seven cities. The company’s 2017 revenue projection is $66 million and they’re scouting the east and south metro for sites to expand the Pittsburgh Blue steakhouse concept.

Expansion is possible for steakhouse concept Pittsburgh Blue, which has locations in Edina (pictured) and Maple Grove.

They’ve made some bad calls. “The stupidest thing we ever did was close Figlio,” says Roberts, naming the restaurant that brought wood-fired pizza and fried calamari to the Twin Cities and ran in Uptown for 25 years before Roberts replaced it with Il Gatto, a restaurant that sputtered out after two years. In March they made the call to close Edina pizza joint Mozza Mia after seven years, “because the current operating environment doesn’t favor restaurants and because Mozza Mia was losing money.”

COO Fahs, who’s been with Parasole for 37 years, says Mozza Mia “just wasn’t performing,” and it was difficult to generate revenue to support running a 9,000-square-foot restaurant.

“Energy, water, food costs, labor—the cost of doing business has increased so substantially that you can lose money if all the stars aren’t aligned,” says Fahs. “It was a hard one for me to swallow, but the numbers just didn’t work out.”

Even in the occasional misstep Mihajlov sees an opportunity to learn and he says new development opportunities are still ahead. Among Parasole’s advantages is its diversification with different concepts, says Mihajlov, noting the range of customers it appeals to on the spectrum from Good Earth to Manny’s.

As a multi-concept operator, Parasole caters to a wide range of demographic groups and can take advantage of the efficiencies characteristic of chain restaurants while also benefiting from local patrons who continue shifting their dining dollars to independent restaurants.

Roberts likens the development of a new concept to creating a Broadway play.

“The script is the menu, then you’ve got the costumes, the set, and you have the cast of characters,” he says.

That newest play is Field Day, the fast-casual version of Good Earth that debuted in October 2016 with its first location at Ridgedale Center in Minnetonka. Focused on natural foods and with a greens-and-grain-bowls menu, it’s a concept Parasole believes has legs—eventually.

“We all know that fast-casual restaurants have taken a slight dip, so we’re watching to make sure we have the right mix,” says Fahs. She’s already made some operational tweaks to get the throughput time down to 8 minutes, the result of reconstructing some of the menu items with fewer components.

At the ownership level, Roberts, Mihajlov and a third investment partner, Kevin Kuester, are working on a succession plan with their executive team, though Roberts jokes, “Pete and I will be working until we go to our graves.”

Both men credit their wives “as the heroines of the story” as they quit lucrative jobs and took out second mortgages on their homes to build what’s become Parasole Restaurant Holdings.

“We’ve been instrumental in changing the Twin Cities, and Pete and I don’t really talk about this,” says Roberts. “But we were the pioneers. Minneapolis and Minnesota have been good to us.” 

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